Page 23 - OUTLINE BUSINESS PLAN

Balance Sheet

Following are guidelines for what to include in the balance sheet: (For use in established businesses)

• Assets: Anything of value that is owned or is legally due to a business. Total assets include all net
values; the amounts that result from subtracting depreciation and amortization from the original cost
when the asset was first acquired.

Current Assets:
• Cash—Money in the bank or resources that can be converted into cash within 12 months of the
date of the balance sheet.

• Petty Cash—A fund of cash for small, miscellaneous expenditures.
• Accounts Receivable—Amounts due from clients for merchandise or services.

• Inventory—Raw materials on hand, work-in-progress, and all finished goods (either manufactured or
purchased for resale).
• Short-term Investments—Interest or dividend-yielding holdings expected to be converted to cash
within a year; stocks, bonds, certificates of deposit and time-deposit savings accounts. These should
be shown at either their cost or current market value, whichever is less. Short-term investments may
also be called “temporary investments” or “marketable securities.”

• Prepaid Expense—Goods, benefits or services that a business pays or rents in advance, such as
office supplies, insurance or workspace.
• Long-term Investments—Holdings that a business intends to retain for at least a year. Also known as
long-term assets, these are usually interest or dividend paying stocks, bonds or savings accounts.
• Fixed Assets—This term includes all resources that a business owns or acquires for use in its operations
that are not intended for resale. They may be leased rather than owned and, depending upon the
leasing arrangements, may have to be included both as an asset for the value and as a liability.
Fixed assets include land (the original purchase price should be listed, without allowance for market
value), buildings, improvements, equipment, furniture, vehicles.

Liabilities:
• Current Liabilities: Include all debts, monetary obligations, and claims payable within 12 months.
• Accounts Payable—Amounts due to suppliers for goods and services purchased for the business.

• Notes Payable—The balance of the principal due on short-term debt, funds borrowed for the
business. Also includes the current amount due on notes whose terms exceed 12 months.
• Interest Payable—Accrued amounts due on both short and long-term borrowed capital and credit
extended to the business.
• Taxes Payable—Amounts incurred during the accounting period covered by the balance sheet.

• Payroll Accrual—Salaries and wages owed during the period covered by the balance sheet.
• Long-term Liabilities—Notes, contract payments, or mortgage payments due over a period
exceeding 12 months. These should be listed by outstanding balance less the current position due.

• Net Worth—Also called owner’s equity. This is the amount of the claim of the owner(s) on the assets
of the business. In a proprietorship or partnership, this equity is each owner’s original investment plus
any earnings after withdrawals.

Most computerized bookkeeping systems can generate a balance sheet for the period(s) required.
Note: Total assets will always equal total liabilities plus total net worth. That is, the bottom-line figures for
total assets and total liabilities will always be the same.

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